S&P buybacks brisk in second-quarter, may set another record: S&P Dow Jones

NEW YORK (Reuters) – S&P 500 companies engaged in a brisk pace of share buybacks in the second quarter, putting them on track to near or beat the first quarter’s record level, according to a S&P Dow Jones Indices analysis.

FILE PHOTO: A trader works in a work space on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 24, 2018. REUTERS/Brendan McDermid/File Photo

Corporate buybacks in the second quarter by S&P 500 companies are at $135.2 billion based on filings so far from 71.8 percent of the S&P 500 companies, the analysis said.

That is about 2 percent below what the total was for a comparable amount of companies in the first quarter, when companies set the quarterly record for total actual S&P 500 buybacks, at $189.1 billion, the report showed.

“We have a shot at breaking that record,” S&P Dow Jones senior index analyst Howard Silverblatt said on Monday, noting that buybacks for the second quarter were running above his expectations.

At the same time, Goldman Sachs said in a note that it raised its estimate for 2018 corporate repurchase authorizations to a record $1 trillion, which would mark a 46 percent increase over last year. Buyback authorizations so far this year are up to $754 billion, Goldman said.

The jump in planned and actual buybacks is largely due to a tax overhaul approved by Congress late last year.

Under the new tax law, domestic corporate profits will be taxed at 21 percent, down from 35 percent previously, while most foreign profits will no longer be taxed. The new law also allows companies to write off immediately the full value of new capital investments.

“Part of the uplift is a direct result of tax reform, but strong cash flow growth has also been essential,” Goldman strategists wrote, adding that August was the most popular month for repurchase executions.